John Higgins at Broadcasting and Cable wrote a good article entitled Cable's Wake-Up Call. (Subscription needed). The article covers the happenings at the Cable & Telecommunications Association for Marketing (CTAM) in Philadelphia last week. It focused on the cable companies, but the Telco's should pay attention for their IPTV offering, too.

But one section conveyed poingnant topics that readers of this blog already have thought about.

The most interesting insight I [John Higgins] heard came almost offhandedly from Marty Youngman, marketing manager of Cox Communications' San Diego system. Youngman noted that, once consumers get VOD and DVRs and are freed from the tyranny of the programming guide, a funny thing happens: Their approach to cable changes.

"We're seeing a behavioral change in San Diego," Youngman said. VOD and DVR subscribers pretty much cease channel-surfing or using their on-screen guides. They are now operating in a search mode, carefully hunting for specific shows or genres.

That presents a couple of quandaries for operators. The immediate one is that there is no fast search engine for shows in cable systems, so it's hard to pluck just the right sitcom out of thousands of choices.

We've talked about that before. While I don't personally spend a lot of time evaluating each nuance of search and recommendations, might I suggest to Mr. Youngman that Cox think big and try to do something like what Netflix does for DVD rentals. Maybe a good start is to read the posting about MeeVee and video search.

John Higgins continues:

So if subscribers can find precisely what they want to watch anytime they want to watch it, the traditional cable-TV model seems almost superfluous. A giant part of their systems' resources is devoted to the conventional cable channels, which suddenly become less important.

Again, right on the money. In the future (10 years perhaps?), networks are in big trouble. Some will do OK, a few might even figure out how to prosper. But a majority of them are doomed. In a VOD-centric world, the best case scenario for a successful network is this:

• The network will have own lots of unique content that will be in demand.
• The network will mostly serve a branding function that helps viewers feel comfortable to checkout new shows they might not watch otherwise.
• The network will cut deals with the Cable MSO/Telco to share ad revenue that will result from a quasi-online ROI ad strategy with agencies.

Operators have spent $80 billion in recent years expanding their capacity to deliver ever more channels. Some of that goes to Internet and phone traffic. But about 75% of the costly capacity is devoted to delivering an average of plain, old linear video channels. It's probably time to spend more of that capital on wilder and more innovative non-linear video ideas.